We believe that with proper recognition, enlightened administration, and reasonable policies, the Patent Office can be made a most effective operating unit. We believe this can best be accomplished within the Department of Commerce organizational structure by raising the level and prestige of the Office of Commissioner of Patents to that of an Assistant Secretary of Commerce. As Assistant Secretary of Commerce for Patents, reporting directly to the Secretary of Commerce, the Commissioner should be more effective and responsive in directing the programs, policies, and administration of the Patent Office.

While we have limited our comments to the five specific subjects mentioned in your announcement concerning the patent law revision hearings, there are many other sections of S. 1321 that are of serious concern to the Manufacturing Chemists Association. We respectfully request, therefore, that this Association, as well as other interested parties, be afforded the opportunity to comment on the other provisions of S. 1321 before your Subcommittee completes action on this measure.

In closing, we wish to commend your Subcommittee for its diligence in striving to provide constructive reform of the Patent Law of the United States. We offer you our continuing assistance in seeking the mutual objective of structuring a Patent Law which will ensure a high level of research and development activity, an increased inventive productivity, and appropriate reward for the same. Such results will be of immeasurable benefit to the social and economic position of the United States as we enter a future of increasing world competition in the fields of technology and scientific progress. Sincerely,

REPORT FROM THE MICHIGAN STATE BAR

W. J. DRIVER.

The following is the majority report of the Committee on Anti-Trust and Patent Law of the Patent Law Section of the Michigan State Bar as approved by the Section Council. It does not, in any way, represent the opinion or position of the Michigan State Bar.

It was the unanimous opinion of the Committee that the U.S. Patent System is in fundamental difficulty and that the problems confronting it require basic changes to make it a productive part of the United States Economic System. It was also concluded that the U.S. Patent System today has largely ceased to function as a means of encouraging individual inventors and small companies. However, it was also concluded that S. 1321 does not offer any viable solutions to the problems, rather it would compound them.

The basic concept of patents is to encourage inventors to publicly disclose their ideas in return for a limited period during which they can recover compensation for their contribution. It is a very important objective of the patent system to serve and encourage both the individual inventor and the small company. The present system has already become so expensive and the patent's value so questionable as to discourage individual inventors and many small companies. S. 1321 will materially increase these costs and for all practical purposes make patents the exclusive province of the very large economic enterprise.

While there are numerous features of S. 1321 which are considered to be objectionable because of cost or being unrealistic from a practical point of view, the following points were given particular consideration:

I. OPPOSITION

The principle of introducing an Opposition Proceeding into the U.S. Patent System is considered desirable but the procedures set out in S. 1321 are considered to be too expensive and too complex. To be practical and effective, the Opposition Proceeding should not occur until after the application is allowed, should be limited in time, conducted without the costly and time consuming discovery procedures used in Federal Court Practice, provide for dissclosure of the name of the Opposer and the evidence produced during the Opposition should be judged by someone, preferably a board, other than the Examiner in charge of the application.

II. PUBLIC COUNSEL

This feature of S. 1321 is objected to because it is much too costly and is considered unworkable. In view of the quantity and complexity of present day

technology, the Public Counsel could not be effective without a supporting staff at least as great as the present examining corps of the Patent Office. The cost both to the Patent Office and to the Applicant would be enormous.

Further, the introduction of discover procedures and the addition of third party practice to the examination procedure would interfere with orderly examination, consume the Examiner's time with procedural matters and make the examinaation prohibitively expensive for the Applicant. It would make patents a luxury that only the large and wealthy economic enterprise would afford.

It was the consensus of the Committee that the Public Counsel would either become an ineffective office or would so complicate the functions of the patent Office as to bring its operations to a standstill.

III. MAINTENANCE FEES

The proposed schedule of Maintenance Fees would effectively deny the benefits of the Patent system to individuals and small companies. Only the large economic enterprise could afford them. The proposed procedures by which individuals and small companies could obtain temporary relief from them are so complicated and costly as to make them economically impractical. The proposed fee schedule would be an additional factor contributing to the growth and economic power concentration of large companies and economic combinations.

IV. COMPULSORY ROYALTY TO INVENTOR BY ASSIGNEE-EMPLOYER

Except in the situation in which the patent is licensed to a third party and earns royalties which can be readily identified, this proposal is considered unworkable. It is not believed possible to identify the contribution of most patented inventions where the invention is used by the employer solely within the employer's own operations. The accounting problems are very difficult and, in any case, would be very expensive and subject to controversy. The proposal is considered impractical and likely to discourage adoption of improvements in products and processes. Alternatively, to avoid exposure to complicated accounting problems, it is believed likely that many employers would feel forced to adopt the improvement without patenting anything and, wherever possible, protect it by secrecy. This would defeat the public disclosure purpose of the patent law. The cost and complexity of the proposed patent examination procedure would effectively deny the employee an opportunity to patent the idea at his own expense.

It was the Committee's opinion that the difficulties of the present patent system largely do not arise out of the present patent law but rather out of its implementation. The patent system would be better served by an improved examination system, coupled with an effective oppposition procedure and a revision of the judicial system under which patents are litigated to introduce greater uniformity into the subjective standards by which they are finally adjudicated.

PREPARED MATERIAL SUBMITTED BY THE MILWAUKEE PATENT LAW
ASSOCIATION

The Milwaukee Patent Law Association at a regular meeting of its members held on September 11, 1973, after having given due consideration to Senate Bill S.1321, upon recommendations of its Committee on Legislation, passed the following Resolutions and approved the supporting memoranda relating thereto:

RESOLUTION NO. 1

(Modification of patent examination proceedings to provide public adversary hearings)

BE IT RESOLVED: That the Milwaukee Patent Law Association hereby goes on record as opposing the provisions of Senate Bill S.1321 permitting wide range third party adversary participation in patent application examination, interference and appellate procedures, for the reasons that:

(1) They will markedly increase the costs and burdens on applicants in obtaining patents.

(2) They could discourage independent inventors of limited means from using the patent system.

(3) They will afford opportunity for delaying and obstructionist tactics by third parties with selfish interests, and

(4) They will complicate the Patent Office administration, and unduly prolong the issuance of patents.

That the Milwaukee Patent Law Association is not opposed, in principle, to some form of public participation in the patent application examining process to enhance the quality of issued patents. However, it believes that to be practical and workable, it should be limited to:

(a) A definite time period during or after completion of the Patent Office's examination of an applicant's claims, and

(b) The public's right to cite patents, documents, or other tangible evidence that may be relevant to the claimed subject matter as regards the conditions and requirements of Secs. 102 and 103 of Title 35 USC.

RESOLUTION NO. 2

(The creation of the Office of Public Counsel)

BE IT RESOLVED: That the Milwaukee Patent Law Association is opposed to the creation of the Office of Public Counsel as envisioned in S.1321 for the reasons that:

(1) The Public Counsel would be required to represent potentially conflicting interests;

(2) The Public Counsel would be an unnecessary intervenor in existing forms of adversary proceedings; and

(3) The establishment of the Office of Public Counsel would lead to the creation of an overlapping bureaucracy in the Patent Office.

Supporting memorandum

As defined by S.1321, the Public Counsel would have at least three potentially conflicting responsibilities. First, he would be responsible for prosecuting and defending appeals from any final action of the Patent Office (Sec. 3(d) (2), Sec. 134(a); Sec. 143; Sec. 145). In this role the Public Counsel would function much as the present Solicitor who is charged to act as the Commissioner's lawyer, except that, contrary to present practice, the Public Counsel would represent the Primary Examiner in appeals before the Board of Appeals. In his second role, the Public Counsel is charged to be the advocate of the public interest to assure a high quality patent system, and to represent the public need to analyze or defend an important, new or developing theory of law, or involving an important, new or developing area of technology. (Sec. 3(d) (1)). The third role is that of investigator and public prosecutor granted by Sec. 3(d) (4) which gives the Public Counsel a roving commission, to participate in all proceedings and conduct investigations or inquiries.

It appears on the face of S.1321 that the roles envisioned for the Public Counsel will require him to represent potentially conflicting interests. In his role as the defender of the final action of the Patent Office, the public counsel must necessarily be representing the examining corpse and the Commissioner to uphold the correctness of their decisions. What, however, of the instance in which the Public Counsel believes that the decision which he is called upon is not in the public interests It is as reasonable to assume that the Public Counsel would decide that the public interest is contrary to the position of the Patent Office as it is to assume that he will decide that the public interest coincides with the position of the Patent Office. If the underlying rationale in S.1321 is that the public interest will always coincide with a Patent Office decision, then there is no need for an advocate of the public interest apart from the Commissioner of Patents and the examining corps.

One of the stated purposes for the establishment of the Public Counsel is to insure high quality patents through an adversary process. If an adversary process is more likely to insure high quality patents, there would be no additional benefit to inserting a third party advocate in those proceedings in which adversary interests are already represented, such as in the normal suit for

patent infringement. Yet, the Public Counsel is given the right to intervene in private infringement actions (Sec. 24; Sec. 3(d) (4)). This seems an unnecessary burden to the present adversary system. It could only result in greater costs in patent litigation which already is an extremely expensive proceeding. Adversary procedures within the Patent Office can be established without creating a need for the Public Counsel.

The Public Counsel, presumably in his role as advocate of the public interest and in his role as public prosecutor, is assigned the duty of considering and reviewing all proceedings in the Patent Office (Sec. 3(d)). He may be called in at any stage by the Primary Examiner (Sec. 132 (a)), and he has the right as a "party" to inform the Commissioner of relevant prior art. It is our belief that it would be necessary for the Public Counsel to have his own examining. staff to conduct searches for relevant prior art and to review the work product of the existing Examining Corps if he were to hope to carry out these duties. It is strongly urged that this would amount to the creation of a bureaucracy within the Patent Office which would, in large part, parallel and overlap the existing functions of the Patent Office itself.

Because of the inherent conflicting roles designed for the Public Counsel, because of the potentiality for the Public Counsel to insert his office into existing adversary proceedings, and because of the potentiality for the creation of bureaucracy within the Patent Office to duplicate and oversee the performance of duties which are to be carried out under statutory command by other staff of the Patent Office, we are opposed to the creation of the Office of Public Counsel.

If, as has always been assumed, it is the duty of the Commissioner of Patents to insure to the extent possible that high quality patents issue from the Patent Office, it is unnecessary to create a separate office to perform that function. If the Commissioner of Patents has been unable to insure the issuance of high quality patents it is not seen how it is possible that the mere addition of an Assistant Commissioner of Patents will improve the track record.

RESOLUTION NO. 3

(Establishment of a system for deferred examination of patent applications) BE IT RESOLVED: That the Milwaukee Patent Law Association considers implementation of a deferred examination system as proposed in S.1321 to be premature and therefore, opposes at this time the deferred examination system proposed in said Bill; and further, that the Milwaukee Patent Law Association urges modification of the publication of Section 122, S.1321 in order to be consistent with publication requirements of foreign patent systems and proposed international patent schemes; and further, that the Milwaukee Patent Law Association urges modification of the term in Section 153, S.1321 to be twenty years without exception.

Supporting memorandum

Consideration of the proposed deferred examination of patent applications as proposed in S.1321 inherently involves consideration of the proposals in that Bill for publication and term of the patent.

While the Milwaukee Patent Law Association does not oppose the concept of a deferred examination system, it seems wise to take advantage of information and experience for such a proposal before its implementation. Such information and experience can best come from countries who have recently adopted a deferred examination system-but there has been insufficient time to permit proper evaluation of these systems. Hence, the objection to the deferred examination system.

S.1321 suggests publication six months after filing of the application. Especially because the recently revised patent systems of the world and proposed international patent systems would call for later publication, generally eighteen months after filing, it seems only prudent to adopt a publication time table which is consistent with other patent systems of the world.

S.1321 proposes a term of twelve years for the patent with provisions to extend that term for any deferral for examination or secrecy. Rather than provide for such extension of the term for specific fact situations which inherently involve certain discrmination and motivations inconsistent with the patent system, it is urged that a fixed term of twenty years from the date of filing be adopted.

RESOLUTION NO. 4

(Revision of the patent fee schedule, including the establishment of maintenance fees)

BE IT RESOLVED:

That the Milwaukee Patent Law Association is opposed to the establishment of a system of fees for the maintenance of U.S. patents on the grounds that they will create a substantial additional burden on the owners of patents and thus tend to discourage the making of inventions, the publication of the same through the patent system, and their ultimate utilization.

FURTHER RESOLVED: That this Association disapproves the maintenance fee provisions of Senate Bill S.1321, 93rd Congress, First Session, and particularly Section 41 thereof.

Supporting memorandum

Section 41 of S.1321 would revise the patent fee schedule to include annual maintenance fees of not to exceed $100 for the first three years, and thereafter of not less than $1,000 per year increased by 25% each year for the life of the patent. Up to 80% of these fees may be exempted to benefit and encourage individual inventors and small businessmen. The revenue derived would be used to defray the cost of running the Patent Office and should result in lower filing and other fee charged by the Patent Office.

On its face, the proposition is appealing because only the valuable patents would be maintained and their owners could well afford to pay the fees. Poor patents would be dropped and would no longer clutter up the records. The greatest burden of fees would only fall after the patents had proved themselves successful rather than when applications are filed.

The basic proposition is not novel since most foreign countries have a graduated system of maintenance fees. This has irritated the U.S. owners of foreign patents, because the foreign owners of U.S. patents have no such burden.

The principal objection to such fees is the inordinate amount of time and expense in making intelligent decisions whether or not to maintain patents having unrealized potential. This can well exceed the amount of the fees. Serious mistakes can be made in dropping patents prior to an opportunity to exploit them.

The Bill cleverly proposes relief for the individual inventor and small businessman. It submitted this provision can give rise to more detriment in the form of abuse, improper favors and administrative expense (both to the Government and the inventor) than the evil it is designed to cure. The management of patents in a large corporation has become so decentralized that the segments involved, including the recent concept of venture managers of various research activities, is not much different than the individual inventor. While the corporation has the money to pay such fees, they simply add to the burden of financing research operations and will discourage the type of activity the patent system is intended to promote

Under the Paris Convention, it is believed that the relief granted individual inventors and small businessmen would have to apply to foreign as well as U.S. nationals. Since many communistic countries issue most of their patents (or inventor certificates) to individuals, our Government would obtain very little revenue from corresponding patents obtained in the U.S.A.

The proponents of the Bill may argue the purpose is not to increase the burden but to shift the burden because of the accompanying reduction in filing fees. If this was the only effect, it is still detrimental because it will encourage the filing on marginal inventions, thus adding to the problems of the Patent Office, and will tend to lower the quality and reliability of U.S. patents. Experience has shown that new forms of taxation, while designed to relieve the burden in some other area, usually result in simply adding another burden. In this instance, the administration of the plan will add substantial cost to everyone concerned.

It should be pointed out that most foreign countries have either (1) no examination system of any consequence, or (2) such a system of examination that once granted, patents have a far greater presumption of validity. In either case, payment of annual fees may be justified as proper revenue producers for what the inventor is getting under their systems. It might be argued that a patent which has borne substantial maintenance fees should be better